I'll Do Whatever I damn Please! Because I can!

This from a fellow memo reader and long time friend. (See 1 below.)

Obama's penata du jour is now the 'former' chairman of GM, Rick Wagoner. Interesting that so many of GM's problems are related to union demands that were inordinate but Obama did not call for the firing of any union executives. The difference is that Demwits receive money from unions and pay back with favorable legislation which then cripples companies, puts workers at risk of losing their jobs which are shipped overseas.

Why does Obama believe the auto industry cannot survive and needs a radical makeover when the auto companies have lost a lot less than his administration will cost tax payers and he has been in office less than 5 months. More hypocrisy? (See 2 below.)

Obama's new foreign policy regarding Syria - take a Muslim to lunch!

Eventually it might include Iran and the Mullahs.

Turkey's pro-Islam administration is giving advice to Obama which, it appears, he will take. (See 3 below.)

Mor hypocritical charges against Israel and the IDF have been disproved. (See 4 below.)

It might be difficult for Obama to save that which he does not understand or seemingly gives a fig about. He is hell bent on implementing his own agenda and everything else be damned because the messiah knows best.

In "The Forgotten Man," the author describes several instances where Roosevelt knowingly contradicted himself because what mattered was 'change.' Roosevelt peremptorily modified our adherence to a gold standard based a whim so that he could pump money into the economy. The nation's reaction: "...the country was in no mood in any case to put Roosevelt's concepts under a microscope. What mattered was change: like an invalid, the country took pleasure in the very thought of motion..." Sound familiar?

Obama can do whatever he damn well pleases because he can. If the consequences were not tragically frightening I would be in favor of giving him all the rope he needs. The problem is that in hanging himself he will take us to the gallows as well. We are still payng for some of Roosevelt's precipitous decisions and for Nixon taking us delinking gold and our currency. (See 5 below.)

Like with Carter, a toothy smile will only carry you so far and its effect will last only so long. (See 6 below.)

If Europe would only keep loving us. (See 7 below.)

Obama's agenda problem strems from his own party according to Jonathan Chait. Will Rogers was right: The Demwits are not an organized party. (See 8 below.)

Weakness does not work according to Reuel Marc Gerecht. (See 9 below.)

Obama can do whatever he damn well pleases because he can. If the consequences were not tragically frightening I would be in favor of giving him all the rope he needs. The problem is that in hanging himself he will take us to the gallows as well.



Dick

1) When Private Investors Get Rich
By John Carney

Tim Geithner keeps saying that investors would share in the downside of any losses in assets purchased through the Public-Private Investment Partnerships. But that’s just not true. It’s entirely possible for the private investors to make money while taxpayers lose money.

The reason is that the asset purchases are financed with non-recourse loans, which effectively means that the private investors can just walk away from any money losing deals while keeping the upside from the winners. Basically, the government is enabling the equivalent of jingle mail. The private equity investors in the plan can treat money losing deals like homeowners underwater mortgages: default on the debt and hand the crappy loans back to the government.

A blogger named Nemo described the problem very nicely. Paul Krugman linked to his blog, and it seems to have crashed now due to the traffic. We'll describe the argument of Nemo here.

•Say a bank has 100 mortgage pools with a face value of $100 each. No one knows what these mortgage pools will actually be worth because we don’t know what the default rates will be and all the models we developed earlier have turned out to produce misinformation. For simplicity’s sake, let’s assume that half are worth $100 and half are worth $0. On average, the pools are worth $50, and the true value of all 100 pools is $5000.
•The FDIC provides 6:1 leverage to purchase each pool, and some investor takes them up on it, bidding $84 apiece. Between the FDIC leverage and the Treasury matching funds, the private equity firm thus offers $8400 for all 100 pools. That’s $600 from Treasury, $600 from the investor and $7,200 from the FDIC.
•Half of the pools wind up worthless. So the investor and the Treasury each lose half the money they invested, $300. The FDIC lent $3,600 but because the loan is non-recourse, the investor doesn’t have to pay it back. Instead, it just hands the FDIC the worthless paper.
•The other half wind up worth $100, for a $16 profit each. The FDIC gets paid back its $3,600 loan. After paying back the loan, the total profit on the pool is $800. That profit gets split evenly with the Treasury. The investor makes $400.
•A $400 gain less the $300 loss leaves the investor with a $100 net gain. So the investor risked $600 to make $100, a tidy 16.7% return. The Treasury is in the same position as the investor, making $100. It almost looks like the tax-payer has made money on this deal.
•And the bank did well, too. It unloaded assets worth $5000 for $8400. So the bank made $3400.
•So in the end, the investor made $400, the Treasury made $400, the bank made $3,400 and the FDIC lost $3,600. The FDIC funds its own loans by borrowing from the Treasury, which means the Treasury—that is, the US taxpayer—is out a net $3,200.
Of course, the FDIC will still owe the money to the Treasury. How will it pay back the loan? It has proved impossible for the FDIC to raise fees on banks because their balance sheets are so shaky. It seems likely that the Treasury will simply have to cancel the loan and eat the loss, or taxpayers will have to inject funds to bailout the FDIC. Either way, taxpayers eat the loss.

2) White House questions viability of GM, Chrysler
By PHILIP ELLIOTT


President Barack Obama is sending a blunt message to Detroit automakers: To survive —and win more government help — they must remake themselves top to bottom. Driving home the point, the White House ousted the General Motors chairman as it rejected GM and Chrysler's restructuring plans.

Obama is set to elaborate on that message Monday when he announces what his White House told reporters over the weekend: Neither GM nor Chrysler submitted acceptable plans to receive additional federal bailout money.

GM chairman Rick Wagoner became the most conspicuous casualty of that decision, forced out Sunday as the White House indicated Detroit must make management and other changes if it hopes to survive — and that the Obama administration will have a hands-on role in those changes.

Michigan Gov. Governor Jennifer Granholm said Wagoner "clearly is a sacrificial lamb" who stepped aside "for the future of the company and for the future of jobs." She spoke on NBC's "Today" show Monday.

Obama said the companies must do more to receive additional financial aid from the government.

"We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge — at the other end — much more lean, mean and competitive than it currently is," Obama said on CBS' "Face the Nation" broadcast Sunday.

Frustrated administration officials, speaking on condition of anonymity ahead of Obama's announcement, said Chrysler has been given a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA. The government will offer up to $6 billion to the companies if they can negotiate a deal before time runs out. If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off.

Shawn Morgan, a Chrysler spokeswoman, declined to comment ahead of Obama's announcement.

For GM, the administration offered 60 days of operating money to restructure. Officials say they believe GM can put together a plan that will keep production lines moving in the coming years.

New directors will now make up the majority of GM's board. Fritz Henderson, GM's president and chief operating officer, became the new CEO. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.

"The board has recognized for some time that the company's restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience," Kresa said in a written statement.

The Obama administration move comes amid public outrage over bonuses paid to business leaders and American International Group executives — set against a severely ailing economy.

GM failed to make good on promises made in exchange for $13.4 billion in government loans. Chrysler, meanwhile, has survived on $4 billion in federal aid during this economic downturn and the worst decline in auto sales in 27 years. In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more. The White House balked and instead started a countdown clock.

Two people familiar with the plan said bankruptcy would still be possible if the automakers failed to restructure. Those officials spoke on condition of anonymity because they were not authorized to make details public.

An exasperated administration official noted that the companies had not done enough to reduce debt; in some cases, it actually increased during this restructuring and review process. GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

GM and Chrysler employ about 140,000 workers in the U.S. In February, GM said it intended to cut 47,000 jobs around the globe, or almost 20 percent of its work force, close hundreds of dealerships and focus on four core brands — Chevrolet, Cadillac, GMC and Buick.

3) Obama may meet Assad in Istanbul to dramatize outreach to Muslims



Turkish prime minister Recip Tayyep Edrogan is leaning hard on the White House for US president Barack Obama to meet Syrian president Bashar Assad. Edrogan says this will dramatize the address Obama plans to deliver from Istanbul on April 7 extending America's hand of peace to Muslims worldwide. It will also telegraph a strong message to the new Netanyah-Barak-Lieberman government that the Obama administration wants Israel to go back to the Turkish-mediated peace talks with Syria begun by Ehud Olmert – this time with active US involvement.

According to Washington sources, which report this exclusively, the White House has neither accepted nor rejected the Turkish premier's initiative, but time for a negative is shrinking.

Obama's outreach to the Muslim world speech will be delivered the day before the start of Jewish Passover festival. Turkish premier maintains that Obama must underscore his message to the Muslim world with actions not just words; a meeting with the Syrian ruler would show he is in earnest.

While the US president's movements in the Turkish city are undisclosed for reasons of security, sources report that he has scheduled an appearance at the second forum of the Alliance of Civilizations in the first week of April in Istanbul. He will be joined on the platform by Erdogan, UN secretary Ban ki-moon, Spanish prime minister Louis Rodriguez Zapatero and one or two influential Muslim clerical figures.

To lend wings to Obama's outreach to the Muslims, White House circles Monday, March 30, leaked word that his team took a hand in persuading Israel to accept a ceasefire which cut short its anti-Hamas operation in Gaza in January. The radical Islamist terrorists had to be spared from total defeat by Israel and their leaders from capture otherwise Assad, as their backer, would be restrained from resuming peace talks with Israel for some time.

The ceasefire gave Assad enough political room to continue the negotiations without losing credibility in the Arab world.

Seymour Hersh of The New Yorker wrote in its coming issue: A major change in American policy toward Syria is clearly under way.

“The return of the Golan Heights is part of a broader strategy for peace in the Middle East that includes countering Iran’s influence… Syria is a strategic linchpin for dealing with Iran and the Palestinian issue."

According to this report, Cheney began getting messages from the Israelis about pressure from Obama when he was still President-elect. Cheney portrayed Obama to the Israelis as a “pro-Palestinian,” who would not support their efforts.

4) IDF ends Gaza probe, says misconduct claims are 'rumors'
By Anshel Pfeffer and Amos Harel

Military Advocate General Brig. Gen. Avichai Mendelblit on Monday instructed the Military Police Investigation unit to close the inquiry into soldiers' accounts of alleged misconduct and serious violations of the army's rules of engagement during Operation Cast Lead.

He said it was unfortunate that the soldiers, who discussed their Gaza experiences in private on Feb. 13 at a military academy session which was later leaked verbatim to the media, had been careless about accuracy.

"It will be difficult to evaluate the damage done to the image and morals [of the armed forces] in Israel and the world", his statement said.

In a press release issued Monday the army said that the preliminary Military Police investigation into the testimonies revealed that they "were based on hearsay and not first-hand experience."

The probe was launched earlier this month after IDF soldiers were quoted as telling a military cadet academy that combat troops in Gaza fired at unarmed Palestinian civilians and vandalized property during Operation Cast Lead. The army has barred those soldiers from speaking to the press. The allegations first surfaced in the media on March 19.

The testimonies include a description by an infantry squad leader of an incident where an IDF sharpshooter mistakenly shot a Palestinian mother and her two children. "There was a house with a family inside .... We put them in a room. Later we left the house and another platoon entered it, and a few days after that there was an order to release the family. They had set up positions upstairs. There was a sniper position on the roof," the soldier said.

Another squad leader from the same brigade told of an incident where the company commander ordered that an elderly Palestinian woman be shot and killed; she was walking on a road about 100 meters from a house the company had commandeered.

IDF investigators said the soldier who alleged that a comrade was given orders to shoot an elderly woman had not witnessed such an event and "was only repeating a rumour he had heard". They noted, on the other hand, that a woman who approached troops and was suspected of being a suicide bomber had been fired upon repeatedly to try to stop her advancing at them.

The Israeli human rights groups B'Tselem, Yesh Din, Physicians for Human Rights and others issued a statement Monday saying "the speedy closing of the investigation immediately raises suspicions that [it] was merely the army's attempt to wipe its hands of all blame for illegal activity..."

The groups said the allegations should be investigated by a non-partisan body.

5) G20: If capitalism is 'overthrown', we'll lose our political freedom: International regulation to manage the economic crisis could have dangerous results.
By Janet Daley.




G20 protestors are wrong to demand the 'overthrow' of capitalism Photo: AP Some of the demonstrators in this week's G20 protest jamboree are demanding the "overthrow" of capitalism. Well, there are lots of things than can be done to "capitalism" – it can be undermined, suppressed, sabotaged, even outlawed – but it cannot be "overthrown" because in itself, it has no power.

It is the very opposite, in fact, of a tyranny. It is simply the conglomeration of all the transactions made between individual and corporate players in an open market. Some people may gain power through those transactions but that power is transient and contingent on their own financial success: they are not installed in immutable positions from which they can be forcibly removed in a coup d'etat.

Those who talk of "overthrowing" capitalism are determined to depict it as a system of government in a precise parallel with socialism, when in reality, capitalism is not a system in the ideological sense.

It is, if anything, an anti-system: the aggregation of human behaviour as it goes about fulfilling particular wants and needs. It can be described in anthropomorphic terms, such as "ruthless" or "benign" but of itself has no motives and no objectives. (Gordon Brown is more than usually fatuous when he insists that markets need to have "values": only people have values, methods of exchange do not.)

It is in the interests of the Left to talk as if capitalism and socialism were precisely analogous because then they can be seen as competitors and in bad times, the command economy as opposed to the market-based one can win the popularity contest. But this fallacious argument into which, I am sorry to say, a great many well-intentioned people are allowing themselves to be drawn is very dangerous: capitalism isn't really an "ism" which is why the term "free market economics" is so much more apt.

When we make the case for capitalism, we are defending the political principle of freedom, not arguing for one kind of rigid economic organisation over another. The debate is being hopelessly muddied by those late converts to free enterprise – politicians like Mr Brown who believe that markets should only survive if they can be made to serve Left-wing purposes.

So the idea that the arguments which will dominate the summit are purely economic is quite wrong: this is about politics. The fundamental disagreement between the United States and Europe amounts to nothing less than the question of whether the great 200 year old experiment in national democracy – government of the people, by the people, and for the people – will survive.

The major dispute over the American preference for fiscal stimulus as opposed to the European priority of global regulation is at the heart of this. Europe may as well get this straight now: Barack Obama will not subject the United States to policing by an international regulatory authority, not just because he puts the economic recovery of his own nation above all other concerns (and from the point of view of the rest of the world, this is no bad thing since American recovery is essential to the future of the global economy) but because to do so would be to sign away the democratic accountability of his and all future US governments to a body in which American voters had no say.

Unlike in Europe – where the historical commitment to democracy has been patchy – America has little difficulty with the question, "who needs to be in charge of our future?" The answer is always, "we the people". Democratic self-governance, and the concept of personal freedom that underpins it, comes first and last.

Which is why the anger in America about bankers (and the recent furore about AIG bonuses) was more personal than political: the rage was against individuals who had abused the freedom of the market and who needed to be punished as individuals.

When the crisis first hit, the overwhelming majority of Americans were vehemently opposed to any bank bail-out. That was why Hank Paulsen's first rescue package was thrown out by Congress: the bankers had screwed up and they were not (hell, no) going to be pulled out of the tank by taxpayer dollars.

The US population had to be painstakingly persuaded that if Wall Street went down, Main Street would go with it before they agreed to stump up: they were much more inclined to believe that the banks should be allowed to go under than that the hard-earned money of ordinary people should be given to support them. You take the consequences of your own stupidity: that's the price of freedom. Faced with the damage that such bank failures would have done to the mass of the population, Americans relented, but I suspect that many still believe they could have rebuilt their lives and economy again from scratch through their own industry and resilience.

The good news is that even in Britain, for all our overheated arguments about the future of capitalism, there seems little appetite for a command economy to replace it. Because people are as disgusted by politicians who have spent their money unwisely as by bankers who have lent it unwisely, they distrust the state as much as they dislike the banks. But they are not at all sure how this notion of international regulation will affect them.

Everybody is telling them that global cooperation (which sounds so nice) is necessary for survival, but nobody is saying what that will actually mean in terms of sacrificing the power they have over their own government – even in the attenuated form in which it still exists in the EU. When people are worried about their survival, it is quite easy to persuade them to suspend what seems like the abstract concept of democracy. But once you have given up, as citizens, that power of restraint over your elected government, you can say goodbye to it forever.

By all means, we must continue to make the moral case for capitalism, but it seems that we have to make the case for democracy, too. People must not be bullied into believing that economic security must be bought at the price of their political birthright. The operative word in the phrase "free market economics" is "free".

6) Nice-guy image buys Obama only so much goodwill
By Clive Crook

During last year’s election campaign, Barack Obama’s supporters stressed his promise as a leader who could restore US standing in the world. Even at home, despite the worsening economy, many of Mr Obama’s fans deemed this his most important virtue. The rest of the world agreed. Understanding that nothing happens unless America takes charge, few other governments were opposed to a renewal of US leadership. On the contrary, most longed for it.

As the Group of 20 developed and emerging nations’ summit in London approaches, how is that going? About as well as could be expected.

Mr Obama’s campaign always exaggerated the difference he would make on foreign policy. His style could hardly be more different from the caricature of US supremacism projected by George W. Bush, but the underlying issues were unlikely to be any easier to deal with. So it has proved. In many areas of foreign and security policy, in contrast to the clear break he is attempting in domestic policy, Mr Obama is mostly rebranding Mr Bush’s approach.

On Iraq, things are moving much as they would have done if Mr Bush were still in office. Likewise in Afghanistan, where the administration is proposing a surge not unlike the one in Iraq – overseen by the same general, under the political supervision of the same defence secretary – which Mr Obama found so unimpressive last year.

On Iran, Mr Obama has for the moment adjusted the rhetoric, but not the underlying condescension, the key demands, or the implicit “do as we say or else”. “War on terror” terminology is used less often and less eagerly than it was by the Bush administration. This has not stopped the US attacking targets in Pakistan, a legally dubious enterprise to put it mildly, and one that looks a lot like waging war on terror. Lately the administration has even wanted North Korea’s leaders to believe that the US might shoot down the rocket they are preparing to launch. How George W. Bush can you get?

What about Guantánamo, which many Americans see as a scar on the country’s conscience and reputation? Mr Obama has reaffirmed his campaign promise to close the prison, and plans are afoot to do this. But the administration is in no hurry to release the people it no longer calls “enemy combatants”. In a recent television interview, the president criticised some of the releases carried out by the Bush administration, mentioning that people let go have rejoined terrorist groups. To the dismay of civil-rights lawyers, the government’s legal posture towards prisoners trying to challenge their detention in court is in most ways indistinguishable from that of the previous administration.

This strategy of mostly persisting with the foreign and security policies of Mr Bush while insisting that those policies have been overthrown has not yet met organised resistance from US allies. The fact that Mr Obama is so much better liked buys him a great deal of goodwill, and the desire to suck up to him still predominates.

Nonetheless, as the new president continues to seek material support for his fundamentally Bush-like security policies – more European troops in Afghanistan, a united front in dealing with Iran and other troublemakers, overseas dispersal of the G-Bay detainees – he is often going to come up empty-handed, leading to disillusionment on both sides. Friction with the allies is likely to increase.

It has already increased markedly in trade and economic policy. The administration is frustrated that Europe’s governments are failing to pull their weight on fiscal stimulus. It talks openly of Europe’s “free-riding” on the much bolder US fiscal expansion.

Each side’s position is defensible. The US is right that a big temporary fiscal stimulus is needed, and that countries such as France and Germany have scope to do more. Europeans are right that their automatic fiscal stabilisers, under the influence of their higher tax rates and bigger welfare states, are more powerful than those of the US, and that comparing discretionary fiscal boosts in isolation is wrong; in most cases their prudent borrowing capacity is also less than that of the US. At the G20 these disagreements will again be papered over.

Even so, they could easily be the prelude to worsening tension over trade. True, the “Buy American” provisions in the fiscal stimulus law were partially defanged at the administration’s request, but the Obama administration has made and continues to emphasise the link between willing fiscal co-operation and commitment to open markets. Given Europe’s relative caution on fiscal policy, this is ominous.

But surely, you say, I am forgetting climate change – where US leadership is so badly needed, and where the Obama administration has promised a clean break with past policy. Thanks for mentioning it.

Mr Obama’s recent budget proposed a cap-and-trade system to curb carbon emissions and raise more than $600bn (€451bn, £420bn) in new revenues over 10 years. Equipped with this bold new initiative, Mr Obama’s team could head to the Copenhagen climate conference in December and assume the leadership role on global warming that the US has hitherto shunned.

The trouble is, many Democrats as well as most Republicans are opposed to cap and trade. They see it as a big new tax – a position that the administration, curiously enough, wishes to deny. Asked this week whether cap and trade would be “a tax on gasoline, electricity and other forms of energy”, Peter Orszag, budget chief, said: “I wouldn’t characterise it like that.” However Mr Orszag would characterise it, Congress now seems likely to leave cap and trade out of the budget, and so far the administration is failing to put up a fight. US negotiators may have to go to Copenhagen with good intentions but no actual policy.

Opinion polls in the US show a disparity between Mr Obama’s personal approval rating, which remains high, and views about his policies, which are less favourable. A poll of world leaders would likely echo the sentiment. At home and abroad, then, the same two questions arise. How long can Mr Obama remain popular if his actions, for one reason or another, are not? And what is popularity worth anyway, where the calculus of ends and means remains unmoved?

7) Obama & Europe: Is the Honeymoon Over?
By David Paul Kuhn

The love affair between Obama and Europe is about to face its first test.

As President Obama steps onto the world stage this week, he must ease the tension between the candidate Europe fell in love with and the president they have yet to substantively embrace.

Obama must now convince his audience that the policies he ran on, and is implementing, are inseparable from the face that Europeans found so fashionable. He is no less compelled to prove to Americans that the warm reception he received as a candidate carries real diplomatic chits as president.

The test for American allies, and perhaps even adversaries, is whether they can show that a turn from George W. Bush's perceived unilateralism to Obama's sought after multilateralism will serve not only their interests but U.S. interests as well. After all, if all politics is local then all international politics is national. Obama must demonstrate to Americans that using your words can, at times, carry one further than one's might.

It's this combination of tests that frames Obama's first extended trip abroad. The president begins tomorrow with the G-20 summit in London, aiming for a global response to a global financial crisis. On Thursday and Friday, Obama attends NATO's 60th anniversary summit meeting in Strasbourg, France and in Baden-Baden and Kehl, Germany, where the commander-in-chief hopes to convince skeptical allies that they too have a stake in the U.S. war in Afghanistan. Obama then goes on to Prague, Ankara and finally Istanbul, where he hopes to convey that the election of a man named Barack and Hussein exemplifies that America is a nation of open minds.

By trip's end Obama though may have little to show for the diplomatic blitz. There is a heightened temptation abroad to scold America. Many U.S. allies and adversaries believe that the war in Iraq has undercut American national security clout and that the global recession has done the same to America's economic authority.

To much of the world, the United States is looking like the Wizard of Oz. The flash is mesmerizing but many nations question the country behind the curtain. They see an unregulated wild west with an unsustainable financial machine that depends on nations like China for endless credit.

As Columbia Professor of International Affairs Michael W. Doyle put it: "The curtain is about to be raised ... and he will walk out as the key actor."

The U.S. narrative, as Europe has long requested, though has changed. The closure of the Guantanamo Bay detention center confirmed a willingness to heed world opinion. The staggered withdrawal of U.S. soldiers in Iraq should help mend the tear in transatlantic relations.

Even Americans are now second-guessing "cowboy capitalism." There is a sense that hedge funds will be regulated like banks, though not to the extent that nations like France desire. The United States has also put its money where its mouth is, investing trillions in revitalizing its own economy at the moment it asks the same of the world powers.

Obama's election was the most powerful gesture of all that the United States has, in the president's words, "turned the page." European magazines covered themselves with photos of Obama during the campaign in a fashion rivaling those of David Beckham. It was just last summer that 200,000 Germans crowded Berlin's Tiergarten park to hear the candidate lecture on how to "save this planet" with an ethos of "global citizenship."

It is Europe however acting most parochial of late. On the eve of the G-20, French President Nicolas Sarkozy argues that "radical reform" of capitalism should be the top issue. German Chancellor Angela Merkel told reporters that she "will not let anyone tell" her "we must spend more money." It was a most blunt, perhaps Bushian, challenge to Obama and British Prime Minister Gordon Brown's effort to orchestrate trillions of dollars in global fiscal stimulus.

The Spanish finance minister, Pedro Solbes, said he too opposes new large-scale spending. The Czech Republic's prime minister characterized the United States' push for a global stimulus as "the road to hell." This rhetoric is hardly the statesmanship Europe has demanded of us.

The responses are also indicative of European national politics. There is less urgency to exit the recession in continental Europe. The focus instead is on long-range solutions like an international financial regulatory structure. Continental Europe's automatic stabilizers pump more money into the economy and its wider safety nets insulate its citizens from economic anxiety. Losing your job, across Europe, does not mean you lose your health insurance.

But as British Member of Parliament Denis MacShane put it, if the world's economies do not recover "who does Mrs. Merkel think is going to buy Mercedes and BMWs?"

In this sense, many continental European leaders seem unwilling to ask their constituents what they have long asked of American presidents: convince their voters that what is in the world's interest is in their national interests as well.

If continental Europe does not ante up, London will look like a G-2 meeting of China and the United States. European nations could relegate themselves to the sidelines even as they hope to prove themselves still vital world players.

It seems Europeans have not generally reconciled with the candidate they fell for. A Financial Times/Harris Poll conducted when Obama was inaugurated found that Europeans wanted the Guantanamo detention center closed but were unwilling to take in some of the captives. Europeans were also opposed to escalating the war in Afghanistan but it's precisely that escalation that is necessary to stabilize the region.

Obama will look to the NATO summit to, at least, earn a communiqué of unified support for America's renewed efforts in Afghanistan. Obama's burden, however, is of perception. The American push for a global economic stimulus is viewed as the assailant asking the victim for help.

"The U.S. is blamed, with some justification, with having inflicted an absolutely disastrous recession on much of the world," said Sebastian Mallaby, the director of the Center for Geoeconomic Studies at the Council on Foreign Relations in Washington.

But the blame game can quickly turn London 2009 into London 1933. More than 50 nations sent delegates to meet at the London Monetary and Economic Conference of 1933 to revive the global economy during the Great Depression. The meeting fell apart when Franklin Roosevelt broke from his British and French allies. That failure assured that the depression turned global.

According to Columbia University's Doyle, "The failure to coordinate," sundered the 1933 conference. "That's why this London summit is so important," he added, "it is the opportunity to do it right."

Obama's desire to deal immediately with the recession, like Roosevelt in 1933, is again up against a continental European desire to return to more orthodox financial standards. But this is the candidate Europe courted. Last summer, when Obama toured the continent, no one anticipated this economic crisis. That's the way marriages go however. It's the hard times that prove their mettle.

8) Why the Democrats Can't Govern:Look who's killing Obama's agenda now.
By Jonathan Chait



The last Democrat who held the White House, Bill Clinton, saw the core of his domestic agenda come to ruin, his political support collapse, and his failure spawn a massive Republican resurgence that made progressive reform impossible for a decade to come. The Democrat who last held the White House before that, Jimmy Carter, saw the exact same thing happen to him.

At this early date, nobody can know whether or not Barack Obama will escape this fate. But the contours of failure are now clearly visible. In Obama's case, as with his predecessors, the prospective culprit is the same: Democrats in Congress, and especially the Senate. At a time when the country desperately needs a coherent response to the array of challenges it faces, the congressional arm of the Democratic Party remains mired in fecklessness, parochialism, and privilege. Obama has made mistakes, as did his predecessors. Yet the constant recurrence of legislative squabbling and drift suggests a deeper problem than any characterological or tactical failures by these presidents: a congressional party that is congenitally unable to govern.

George W. Bush came to office having lost the popular vote, with only 50 Republicans in the Senate. After his disputed election, pundits insisted Bush would have to scale back his proposed massive tax cuts for the rich. Instead, Bush managed to enact several rounds of tax cuts that substantially exceeded those in his campaign platform, along with two war resolutions, a Medicare prescription drug benefit designed to maximize profits for the health care industry, energy legislation, education reform, and sundry other items. Whatever the substantive merits of this agenda, its passage represented an impressive feat of political leverage, accomplished through near-total partisan discipline.

Obama has come into office having won the popular vote by seven percentage points, along with a 79-seat edge in the House, a 17-seat edge in the Senate, and massive public demand for change. But it's already clear he is receiving less, not more, deference from his own party. Democrats have treated Obama with studied diffidence, both in their support for the substance of his agenda and (more importantly) their willingness to support it procedurally.



The tone of the Senate's disposition toward Obama was set from the very beginning. Coming into office during a severe economic emergency, he hoped that Congress would have a bill to jump-start consumer demand ready to sign immediately upon taking office. And most Democrats supported Obama's position, though eleven House moderates defected, while a handful of their Senate colleagues joined with Republican moderates to water down the legislation. Economic forecasters projected that the original House bill would increase employment by 3.5 million. After the Senate rewrote the bill, forecasters downgraded their estimate to just 2.5 million. Moderates regarded their contribution with deep satisfaction.

The stimulus served as a mere precursor to the major battle over Obama's budget, which represents a once-in-a-generation chance for the Democratic Party to reshape the priorities of the federal government--to reduce America's unsustainable carbon emissions and reform its bloated, cruel health care system. Democrats have utterly failed to rise to the occasion.

The first sign of how the Senate would respond came on February 27, when Kent Conrad, the chairman of the Senate Budget Committee, gave an interview to CNBC. Conrad listed three objections to Obama's budget. First, he opposed a provision to limit tax deductions for high-income earners. Second, he opposed a new cap on crop subsidies to farmers who take in more than $500,000 per year. And, third, he upbraided Obama for not doing more to reduce the budget deficit.

You might think a performance like this--demanding that Obama do more to reduce the deficit while simultaneously opposing his deficit-reducing measures--would have turned Conrad into a punch line. Instead, it launched him as a symbol of fiscal rectitude and encouraged fellow Democrats to follow in his hypocritical wake. Numerous Democrats have since stepped forward to join what news reports have accurately described as a "revolt" against Obama's budget.

Watch TNR senior editor Jonathan Chait discuss this article with TNR editor Franklin Foer:



What's maddening is not that Obama's budget is a perfect document--though it does a better job of setting priorities than any presidential budget in at least the last 30 years--but that the deficit-reducing measures Democrats object to are the most sensible parts of the budget.

Take the farm payments Conrad endorses. It is virtually impossible to find an economist on the left, right, or center who defends agriculture subsidies, which are costly, distort the market, and hurt the Third World poor. Obama does not dare phase out crop subsidies. Instead, he modestly asks to save about $1 billion per year by eliminating payments to farmers who gross more than $500, 000 per year--the least justifiable slice of a totally unjustifiable program. Conrad the Deficit Hawk, joined by other farm-state senators (such as Nebraska's Ben Nelson) and representatives, cannot abide it.

Or consider Obama's plan to limit tax deductions for the rich. If your goal is to raise revenue without imposing pain on the middle class or unduly harming incentives, this is about the best way one can do it. (Because limiting deductions would not raise marginal tax rates, objections from conservative economists have been generally muted.) Democrats in both chambers have declared this proposal dead on arrival. But, if they want to reduce the deficit and fund health care reform, the money needs to come from somewhere.



The most emblematic objection has come from Nelson, who is balking at Obama's plan to save money on college loans. You might suppose that a fiscal conservative like Nelson would agree with Obama's plan to save $4 billion on a social program. But he does not, for reasons that provide a useful window into the rot afflicting the congressional Democratic Party.

For many years, the federal government supported college education by guaranteeing bank loans to students. If a student defaulted on his loan, Washington would simply pay back the difference. In 1993, Clinton undertook to reform the program by cutting out the middlemen and simply having the federal government issue the loans directly. Clinton hoped to save money for the government and plow some of those savings into lower interest rates for students. Of course, private lenders who benefitted from the no-risk profit stream balked and forced a compromise whereby both kinds of loans--guaranteed private loans, and direct loans from the government--would exist side by side.

Recent years have shown beyond a doubt that the direct lending program works better. Every independent analysis--by the Congressional Budget Office, by the Office of Management and Budget under each of the last three presidents, and by the New America Foundation--has found that direct lending is cheaper. The guaranteed-loan program managed to cling to life through its congressional patrons and through simple graft. In 2007, a major student-loan scandal emerged when it turned out that private lenders paid off college administrators to drop out of the direct lending program and steer students to them.

Obama thus proposes to save the taxpayers more than $4 billion per year by ending the guaranteed loans. This is as straightforward a case as you can find of a fight between special interests and the public good. Nelson opposes it because one of the lenders that benefits from federal overpayments is based in Lincoln, Nebraska.

Some moderate Democrats seem to suffer from a conflation of their own fund-raising strategies with responsible fiscal policy. The Wall Street Journal reported, of a group of Democratic Senate centrists, "Their stated goal is to rein in deficits and to protect business interests." In fact, this is not a goal but two often-conflicting goals, and neither is synonymous with "the national interest." This sort of behavior didn't hurt Bush because his agenda largely was synonymous with business interests. But the Democratic agenda isn't, and Democratic confusion of the two is poisonous.



A second and related problem is that Democrats are especially susceptible to the dysfunction of the Senate. Congressional scholar Norm Ornstein of the American Enterprise Institute penned an article in AEI's magazine titled "Our Broken Senate." Over the last three decades, the filibuster, once a rare weapon used to express unusually strong objections, has dramatically expanded and turned into a routine, 60-vote supermajority requirement. During the same time period, the Senate has developed a new, anonymous one-person filibuster called a "hold." The clubby traditions of the Senate have allowed these new practices to expand unchallenged. "The always individual-oriented Senate," writes Ornstein, "has become even more indulgent of the demands of each of its 100 egotists."

The Senate poses a particular obstacle to Democrats. Its structure gives greater voice to residents of low-population states, who tilt more Republican than the country as a whole. If you assume that every senator represents half the population of that state, then the Republican caucus represents less than 38 percent of the public. In electoral terms, we think of that as a tiny, even fringe minority. It's less than the share of the electorate that voted for Barry Goldwater in 1964. But it supports enough senators to block the majority's will.

There is one tool available to break through the new supermajority requirement. That tool is called "reconciliation." Reconciliation is an expedited process to vote on a budget, limiting debate to 20 hours and, more importantly, circumventing the filibuster. This means that one budget bill every year can be passed with just 51 votes. As the filibuster has grown routine, reconciliation has become a vital legislative tool. Many Democrats, alas, are far more squeamish than their GOP colleagues about deploying this tool.

If you do not follow Senate arcana for a living, you have probably never heard of reconciliation until the last few weeks, when it has suddenly emerged into the public debate as a terrible weapon with fearsome consequences. A recent front-page Washington Post article described reconciliation as a "shortcut." Republican Senator Judd Gregg cast the tactic in the most dramatic terms. "You're talking about running over the minority, putting them in cement and throwing them in the Chicago River," he wailed.

The notion that reconciliation represents some radical and extreme partisan step has settled in so deeply in part because numerous Democrats are making the same case, albeit in slightly less hysterical terms. Eight Democratic senators signed a letter opposing the use of reconciliation to pass a cap-and-trade bill limiting carbon-dioxide emissions. Reconciliation, they wrote, "would circumvent normal Senate practice and would be inconsistent with the administration's stated goals of bipartisanship, cooperation, and openness." Several Democrats also oppose using reconciliation to pass health care reform. Democrat Mary Landrieu offered up a somewhat less melodramatic argument when she said that reconciliation "was intended for deficit reduction, and it should not be used for other things."

Reconciliation may have been intended for deficit reduction, but it has been often used for other things, such as deficit expansion--as in the case of the Bush tax cuts, which Landrieu voted for. (As did Gregg, who, as my colleague Jonathan Cohn discovered, was happy to support reconciliation for proposals like drilling for oil in ANWR when Republicans controlled the majority.)

There is, to be sure, a technical case to be made against the use of reconciliation. It's a more limited procedure that allows for less debate and may constrict the scope of the legislation that can be passed. I'd argue, in response, that the technical compromises required to get through reconciliation would degrade the legislation less than the political compromises required to get 60 votes. But the heart of the case against reconciliation isn't technical, it's moral--reconciliation as an unprecedented act of partisan irresponsibility. Robert Byrd calls the process "an undemocratic disservice to our people and to the Senate's institutional role."

To grasp how upside-down this view is, remember the purpose of the reconciliation process, which is to clear the way for the Senate to make politically painful solutions to long-term problems. Health care and climate change clearly fall into that category. Shoveling hundreds of billions of dollars of upper-class tax cuts out the door, by contrast, is the very opposite of what reconciliation is intended for. And yet, Bush's repeated use of reconciliation to enact his tax cuts attracted no controversy at all.



Even at this early date, the contrast between Democrats under Obama and Republicans under Bush is stark. Republicans did not denounce Bush for squandering a budget surplus to benefit the rich, the way Democrats now assail Obama for big spending and deficits. And Republicans did not refuse to use the budget procedures available to them to break through the Senate's inherent lethargy. Republicans, in other words, acted like a parliamentary party.

Voters in 2000 did not go to the polls with the intention of giving the GOP a chance to put its agenda into place. But Republicans acted as if they did. With very few exceptions, Republicans in Congress behaved like the legislative branch of the Bush administration, helping Bush enact his agenda by using every method at their disposal.

Democratic partisans constantly complain that their leaders in Washington fail to display the same partisan unity as Republicans do. And, in many crucial respects, they are correct. Even when they control the White House and both branches of Congress, Democrats have not displayed the parliamentary-style cohesion Republicans managed under Bush.

One reason is that Democrats are trapped by their past. America's two major parties have, historically, lacked much ideological cohesion. The GOP contained conservatives alongside progressives. The Democratic Party consisted of everything from Northern liberals to Southern reactionaries. The latter, in particular, held disproportionate sway in Congress. Having less in common with Democratic presidents than Republican ones, they carved out an independent role and guarded their prerogatives.

Since Democrats controlled the Congress almost continuously for more than 60 years beginning in 1933, the culture of Congress left a deeper imprint on their party. Republicans, shut out from the perks of majority status, finally decided under the opposition leadership of Newt Gingrich in the 1990s that their only path to power lay in partisan discipline.

Democrats, on the other hand, came of age under the old Democratic chieftains, and they have mostly aped that style. They do not fall in line, even under a Democratic president who mostly shares their goals. Shortly after Obama took office, Senate Majority Leader Harry Reid announced, "I don't work for him." Even House Ways and Means Chairman Charlie Rangel, whose Harlem constituents danced in the streets after Obama's election, sniffed of Obama's plan to raise taxes on the rich, "I have to study it but I really don't take presidents' recommendations that seriously." Recommendation--that is the term that summarizes Congress's attitude. A president can suggest whatever he likes, but Congress is the one making the decisions, and don't you forget it.

A second factor encouraging Democrats to buck their presidents is the role of the rich and business interests. Unless you are a high school student reading this article in your civics course, in which case I'm sorry to dispel your illusions, you will not be stunned to learn that the affluent carry disproportionate political weight with elites in both parties. So, while people who earn more than $250,000 per year make up just a tiny slice of the electorate, they make up a huge chunk of any congressman's friends, acquaintances, and fund-raisers.

What's more, whatever their disposition toward business in general, Democrats feel it is not just a right but a duty to slavishly attend to the interests of their home-state businesses. That is why Kent Conrad upholds even the most absurd demands of agribusiness, or why even a good-government progressive like Michigan's Carl Levin parrots the auto industry's line on regulating carbon dioxide.

Taken as a whole, then, the influence of business and the rich unites Republicans and splits Democrats. A few Republicans no doubt felt some qualms about supporting Bush's regressive, extreme pro-business agenda, but their most influential donors and constituents pushed them in the direction of partisan unity. Those same forces encourage Democrats to defect. That's why Ben Nelson is fighting student-loan reform, coal-and oil-state Democrats are insisting that cap-and-trade legislation be subject to a filibuster, and Democrats everywhere are fretting about reducing tax deductions for the highest-earning 1 percent of the population.



And then, finally, Democrats have locked themselves into a self-fulfilling prophecy. When their party controls all of Washington, things tend to go south quickly. The president's popularity plunges, and soon his copartisans in Congress find themselves scrambling to keep from losing their own seats in the political undertow. It happened to Carter in 1978 and 1980, and again to Clinton in 1994.

And, so, they hedge their bets by carving out an independent identity. It doesn't matter that Obama is popular now, or that a majority of Americans (according to a recent Pew poll) reject the criticism that he's "trying to do too much." If Obama defies history and retains his popularity, they'll retain their seats anyway. They have to worry about the scenario where Obama turns into an albatross.

But, of course, the more Democrats defect, the more the president is defined as an extreme liberal, and the more ineffectual he seems as his agenda crashes upon the shoals. Ultimately, the moderates find there is no escape. Republicans in Congress grasped the futility of beggar-thy-neighbor survivalism, and they stood behind Bush in 2005 and 2006, even as his popularity fell to Nixonian levels. The hard truth for Democrats is that Obama's popularity is bound to fall. The economy will not turn around overnight, and the voters' memory of disastrous GOP rule will grow dimmer and dimmer with time. The one factor within the Democrats' control is whether their constituents see Obama as a strong leader taking action, like Roosevelt or Kennedy, or a floundering weakling, like Carter or first-term Clinton.

It seems impossible to believe that this party, with the challenges before the country so great and the opportunity to address them so rare, would once again follow the path to self-immolation. Yet, somehow, the Democrats can't help themselves.

9) The Return of Weakness: President Obama means well. Iran doesn't.
By Reuel Marc Gerecht



In diplomacy and espionage, there is no worse mistake than "mirror-imaging," that is, ascribing to foreigners your own actions and views. For Westerners this is especially debilitating, given our modern proclivity to assume that others pursue their interests in secular, material, and guilt-ridden ways. Confession is an important part of the Western tradition; self-criticism is less acute elsewhere. Americans, the British, the Spanish, and the French have written libraries about their own imperialistic sins; Arabs, Iranians, Turks, and Russians have not. In an unsuccessful effort to reach out to Iran's clerical regime in 1999, President Bill Clinton apologized for the actions of the entire Western world. Last week, in response to President Barack Obama's let's-talk greetings broadcast to Iran, theocratic overlord Ali Khamenei, "supreme leader" of the Islamic Republic of Iran, enumerated 30 years' worth of America's dastardly deeds against the Islamic revolution--but not a peccadillo that the clerical regime had committed against any Western country.

Looking overseas, many Americans are feeling guilty. George W. Bush and his wars have embarrassed Democrats and Republicans. So the Obama administration has tried to push the "reset" button, and not just with Russia. Nowhere has this American sense of guilt been more on display than in the Middle East: Obama has picked up where Bill Clinton left off, trying to engage diplomatically Iran and Syria, and perhaps down the road the Palestinian fundamentalist movement Hamas. Yet nowhere is guilt-fueled mirror-imaging more dangerous.

Washington is again putting U.S.-Iranian relations on the psychiatrist's couch, treating the mullahs as if they were something other than masters of Islamic machtpolitik. Obama's message to Khamenei emphasizes "mutual respect," "shared hopes," "common dreams," and Iran's great historic "ability to build and create." I would bet the national debt that the president and the supreme leader share not a single hope or dream that could possibly have any bearing on the relations between their two countries. Khamenei is a serious revolutionary cleric and a man of considerable personal integrity who has suffered severely for his beliefs (in 1981 a bomb blast mangled his right arm). He is a faithful son of the Islamic revolution.

In his public orations, Khamenei has regularly dreamed of Muslims'


uniting in one line  .  .  .  amassing all the elements of their power to strengthen the Islamic community--learning and wisdom, prudence and vigilance, an historic sense of duty and commitment, and reliance and hope in the divine promise--so that it can attain glory, independence, and spiritual and material progress, and the enemy [the United States], in its pursuit of grandeur and the control of Muslim lands, can see defeat.


For Khamenei, there is no goal more divine than seeing America and her allies driven from the Middle East.

Khamenei has led revolutionary Iran since the death of the Ayatollah Khomeini in 1989. To fulfill God's promise and his own duty, Khamenei authorized the bombing attack on the United States at Khobar Towers (U.S. death toll: 19 servicemen) in 1996; aid to violent Islamist groups including al Qaeda (see the 9/11 Commission report), Hezbollah, and Hamas; the export to Iraq of Iranian-manufactured remote-controlled explosive devices and Iranian-trained assassination teams; ties with anti-American regimes abroad (President Chávez of Venezuela has visited four times); and the development of a nuclear weapons program. Khamenei--not Iran's colorful president, Mahmoud Ahmadinejad--turned the Islamic Republic into a turbo-charged engine of anti-Semitism and anti-Zionism. Khamenei, not Ahmadinejad, con-verted the Revolutionary Guards Corps and its thuggish, morals-enforcing appendage, the Basij, into major political players.

On Khamenei's watch, the Iranian reform movement, spearheaded by disaffected disciples of the revolution and university students, has been politically crushed and many of its most important members exiled, jailed, beaten, and, in the case of Saeed Hajjarian, a founding father of the clerical regime's intelligence service, shot in the head. As Iran's internal politics have gotten worse, however, Western hope for meaningful diplomacy with the regime has risen.

Thus, the eternal advocates of en--gagement counsel engaging Khamenei, who they insist is really a "conservative pragmatist." Thoughtful Iran analysts have peered into the eyes of Khamenei (his speeches aren't helpful) and seen Boeing aircraft parts, oil and gas deals, pipelines, and eventually an American embassy in Tehran. They have not seen a man of God and politics whose cherished conception of a just world is inimical to both Democratic and Republican visions of what is right.

This hope attached to Khamenei and to dialogue is partly just a reaction against George W. Bush. Many feared Bush would attack Iran's nuclear facilities. "Diplomacy first, diplomacy only" became a mantra in Europe, since most Europeans would rather see the clerics go nuclear than have the United States (or Israel) do anything harsh to stop them. Most in the Obama administration no doubt share this view.

But misleading analysis easily follows: Europeans and Americans who are adamantly opposed to the use of force (or economy-crushing sanctions) naturally start to see "pragmatists" where they don't exist. Khamenei calls the United States "Satan Incarnate" and President Obama responds with a verse about brotherhood from the Persian Sufi poet Saadi. To respond otherwise would be to act like Bush. (Note to the White House: Revolutionary clerics don't appreciate Sufism, with its ecumenical call for brotherhood. They harass and suppress it.)


Much of Obama's outreach could be chalked up as harmless if the stakes weren't so high. The truth: The administration knows that it will probably fail to stop Iran from developing a nuclear weapon through diplomacy or sanctions. The only sanctions that could conceivably pull the regime to the negotiating table, freeze its nuclear program, and allow for inspections of its closed nuclear sites would be energy related. Stopping the export of gasoline to Iran (which cannot refine enough for its domestic market) could have a devastating effect on Iran's economy and public morale. But neither the Obama administration nor the Europeans like the "big stick" approach. In other words, the nuke is coming.

How alarming is that? Since 9/11, conversations about combating terrorism have revolved around non-state actors, a disposition reinforced by the war in Iraq and the controversy over Saddam Hussein's links to terrorists, in particular al Qaeda. Yet this disposition is unwise. Even the Bush administration never wanted to touch the 9/11 Commission report's revelations about Iranian ties to al Qaeda--impressed by al Qaeda's attack on the USS Cole in 2000, the mullahs reached out to Osama bin Laden--since to do so would supercharge any discussion of policy toward Tehran. So the question remains: Should the United States allow a virulently anti-American regime that knowingly aided al Qaeda to have an atomic bomb?

We don't know what the mullahs will do once they have a nuclear weapon. They may act as the Pakistanis did after they got theirs: much more aggressively. Pakistan's ruler Pervez Musharraf almost provoked a massive war with India over Kargil. Clerical Iran's conception of itself is far more grandiose than Pakistan's. Its support for anti-American terrorism is unrivaled among Middle Eastern states. Almost 30 years ago, Tehran reached out to Ayman al Zawahiri and his murderous band of Egyptian jihadists. It is highly likely that this contact led to Iran's later offer of assistance to al Qaeda.

Remember: The same individuals who brought us the Khobar Towers bombing are with us today. Their power is undiminished. If anything, their rhetoric against the United States--and certainly their lethal actions in Iraq and Afghanistan--are harsher than they were in the mid-1990s, when President Ali Akbar Hashemi Rafsanjani, with Khamenei by his side, appealed to Europeans for more investment and trade while sending assassination teams clandestinely to kill Iranian dissidents in Europe.

The Obama administration now runs the risk of appearing weak in its dealings with Tehran. Whether through mirror-imaging or conflict avoidance, it has set the stage for an embarrassing denouement. Unless Washington can convince itself, and then the Europeans, to implement draconian sanctions, Iran will get its nuke. Once that happens, the appeasement (or engagement) reflex will come powerfully into play. The Islamic Republic's appetite to push its newly obtained strategic advantage could prove irresistible.

The clerical regime has never abandoned its ecumenical outreach to Sunni militants. American success, or more likely failure, in Iraq or Afghanistan could be a powerful spur to Iran to strike. State-supported terrorism, which would be both denied and nuclear-protected, could come ferociously back at us. It was a truly nervy move for Damascus, Tehran's closest Arab ally, to have the North Koreans build a uranium-processing plant (the one the Israelis bombed in September 2007). But then, terrorist-supporting "rogue states," by definition, do nervy, unexpected things.


It is useful to remember what has motivated the Iranians to talk in the past: fear. Fear that the Islamic revolution would collapse brought Khomeini to the negotiating table with Iraq in 1988. And, most tellingly, there is 2003, when Tehran made an overture--how serious is unclear--to the United States via the Swiss ambassador in Tehran. To state the obvious: After the fall of Saddam Hussein, Tehran was terrified that President Bush might eliminate another member of the "axis of evil," the one that had just been discovered to have a massive underground uranium-enrichment facility at Natanz. It was fear, not "mutual respect," that provoked some within the clerical regime to reach out to Washington.

Severe tension in foreign affairs is often salutary. Although it is out of fashion to say so, American hard and soft power in the Muslim Middle East has been mostly a force for good. For much of the last 30 years, U.S. power has helped to check Iran's revolutionary potential and offered a seductive alternative to the mullahs' spirit-crunching theocratic state.

The United States, not Europe, became the focus of Iranians' profound fascination with the West. The strongest, most explicit internal denunciation of revolutionary Islamist extremism ever made was that of the cleric Abdullah Nouri, interior minister under presidents Rafsanjani and Khatami. A faithful and loving disciple of the Ayatollah Khomeini and Khomeini's "defrocked" one-time successor, Ali Montazeri, Nouri was put on trial in 1999 for challenging the regime's monopoly of power and faith. More than anyone before or since, he mocked the regime's fear of the United States, suggesting that Islam really ought to be able to withstand the restoration of diplomatic relations with Washington. Nouri was nearly killed in jail, where he spent about four years.

Iran's reform movement has been most unnerving to the regime's hard core when advanced by famous foot soldiers of the Islamic revolution like Nouri. But it is in great part a product of the enormous, healthy tension that has existed between the United States and the Islamic Republic. The denial of legitimacy by the United States--and secondarily by Europe, which has sometimes treated Iran's female-oppressing, dissident-killing clerics as moral reprobates--has had an effect inside the country, provoking important debates about Iran's place in the world and its politico-religious ethics. Indeed, it is difficult to imagine the intellectual survival of the reform movement if the United States had not denied the mullahs the respect that they demand from their own citizenry and increasingly do not receive.

It is clear that President Obama means well, yet his good intentions could end up accomplishing the exact opposite of what he wants. Irony is, of course, a Persian forte. It is less appreciated in the United States.